Labor Market Frictions and Lowest Low Fertility

50 Pages Posted: 4 Dec 2019 Last revised: 29 Mar 2022

See all articles by Nezih Guner

Nezih Guner

Centre for Monetary and Financial Studies (CEMFI)

Ezgi Kaya

Cardiff Business School

Virginia Sánchez-Marcos

University of Cantabria - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 2019

Abstract

The total fertility rate is well below its replacement level of 2.1 children in high-

income countries. Why do women choose such low fertility levels? We study how

labor market frictions affect the fertility of college-educated women. We focus on

two frictions: uncertainty created by dual labor markets (the coexistence of jobs with

temporary and open-ended contracts) and inflexibility of work schedules. Using rich

administrative data from the Spanish Social Security records, we show that women

are less likely to be promoted to permanent jobs than men. Temporary contracts are

also associated with a lower probability of first birth. With Time Use data, we also

show that women with children are less likely to work in jobs with split-shift schedules,

which come with a fixed time cost. We then build a life-cycle model in which married

women decide whether to work or not, how many children to have, and when to have

them. In the model, women face a trade-off between having children early and waiting

and building their careers. We show that reforms that reduce the labor market duality

and eliminate split-shift schedules increase the completed fertility of college-educated

from 1.52 to 1.88. These reforms enable women to have more children and have them

early in their life-cycle. They also increase the labor force participation of women and

eliminate the employment gap between mothers and non-mothers.

Keywords: Fertility, Labor market frictions, Split-Shift Schedules, Temporary contracts

JEL Classification: E24, J13, J21, J22

Suggested Citation

Guner, Nezih and Kaya, Ezgi and Sánchez-Marcos, Virginia, Labor Market Frictions and Lowest Low Fertility (November 2019). CEPR Discussion Paper No. DP14139, Available at SSRN: https://ssrn.com/abstract=3496628

Nezih Guner (Contact Author)

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain

Ezgi Kaya

Cardiff Business School ( email )

Aberconway Building
Column Drive
Cardiff, CF10 3EU
United Kingdom

Virginia Sánchez-Marcos

University of Cantabria - Department of Economics ( email )

Av. Los Castros s/n
Santander 39005, Cantabria 39005
Spain

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